In the current markets scenario, only a few sectors such as auto and defence can provide momentum, Samco Mutual Fund chief executive Viraj Gandhi said on Thursday.
With the benchmarks staying around the same levels as the last month, Gandhi has highlighted the need for using algo strategies as they bring discipline.
Case for momentum investing in a flat market
Emphasising the role of factor investing, he said the momentum factor has delivered the highest alpha of outperformance across asset classes both in India and abroad, and the fund house uses this factor in all of the algos used by its schemes. “This also reduces the overlap percentage,” Gandhi said.
The fund house has total assets under management (AUM) of around Rs 3,000 crore. Gandhi said, “Momentum will identify the space in which growth is happening and it is a broader concept than other factors like quality and value.”
In July, Samco had around 8% of its total equity AUM in cash. “When we see anti-momentum in any segment, we buy them in the derivatives market to hedge,” Gandhi said.
Market consolidation and long-term portfolio building
He highlighted that in the last 12 months, the market has gone nowhere, but the total collection stood at Rs 4.3 lakh crore, with the highest collection of Rs 99,000 crore coming in from sectoral and thematic funds. Flexicap funds and smallcap funds have garnered approximately Rs 68,600 crore and Rs 55,000 crore, respectively.
“This a market of consolidation and accumulation. In the past four years, we have done brilliantly, these are good levels to build your portfolio for long-term,” Gandhi said.